3 tips to becoming a high-margin contractor

What would an average day in your job look like? Do you spend most of the day calling subcontractors and suppliers and visting jobsites? Or are you more likely to be scheduling, pricing bids, telling supervisors what to do, or making sure that all deliveries are made? Most construction business owners and managers work hard on tasks but don't focus on what truly helps to make their companies better. It's time to decide if your activities help improve your margins, find better customers, win better contracts or move you toward achieving your overall goals.

We've listed the top daily priorities you should consider to grow your business and increase profit margins.

Money-maker vs. Money-saver

Getting the job done for the cheapest price, maximising your field crew’s productivity, cost reduction measures, hiring low-cost labour, and running the company with too few team members are some of the things that money-savers do – tasks that only focus on getting the job done. On the other hand, money-makers focus on nurturing loyal customers, creating a responsible team, seeking profitable sales, implementing a standardised system, seeking high-margin work that have less competition, and looking for better ways to grow their business.

Instead of spending time trying to save every dollar possible, you should focus on creating and growing a profitable construction company. Invest in experienced managers, supervisors and employees as they will help your company succeed in the long run. Spend your time finding the perfect customers who will be loyal to your company and, at the same time, will help promote your services to others. Prioritise doing research to find ways that will increase your company’s value – identify areas to fix and improve, track your company’s goals, keep your team on track to improve their productivity, and nurture your customers.

Don’t be satisfied with low margins

A lot of construction company owners are satisfied with low marings because they don’t know their exact numbers, they don’t track the costs of their jobs, nor do they review any financial statements on a regular basis. Not having a proper business system and not having an experienced team who you can delegate projects to are also reasons as to why some businesses have low margins.

Companies who are considered high-margin track and set goals. They know their numbers like the back of their hands, and they have an experienced management team who runs the company. High-margin companies also prioritise perfecting a business development plan that will help them find and keep high-margin customers.

The average construction company bids on projects that require minimal pre-qualification requirements – these projects have high competition and are low-margin – which keeps them busy, but gets them very minimal profit. On the other hand, high-margin construction companies focus on acquiring and building a strong relationship with loyal customers who value their service and company, as well as find projects where they can fully showcase their expertise and track record – and these will increase ROI in the long run.

Decide on what you want for your company

When deciding on how you want your company to operate in the future, as a business owner, you have to determine what it is that you need in order to build and run a high-margin construction company. How do you do this, you ask? You simply make a list of what works for your company and what doesn’t work.

The easiest way to come up with a list is to write down 4 categories, namely company, operations, business development, and financial. Write down what you want to achieve in the next few years for each category, including what you want to improve, fix, accomplish or implement so that your company can prosper.

High-margin contractors and construction companies focus on the aspects of their business that brings in the greatest ROI. It could be finding loyal customers, developing an edge in the industry or taking steps to become better than their competitors. They also seek high-margin jobs, as well as create and nurture a strong team.

Becoming a high-margin construction company could take years, but the effort is obviously worth it if it brings in more work for you and increases your ROI.

If you're involved in procurement, on a private or company level, it’s a powerful tool to know how to get the best value rates for your project.

We know it’s time consuming to research this from scratch, so we’ve written an eBook on the 7 Factors Affecting Plant Hire Rates. Construction professionals that understand the changing market are better equipped to provide value to their client.